This week (July 2022) the South African Reserve Bank (SARB) announced its intention to treat cryptocurrencies as financial assets and not as currencies. It is expected that the SARB will bring regulatory rules to the crypto industry by early 2023.
Cryptos are not a currency, but an asset
Deputy governor of the SARB, Kuben Chetty says cryptos are not a currency but an asset. “By all definitions, it’s (cryptos) not a currency, it’s an asset. It’s something that is tradable, it’s something that is created. Some have backing, others do not. Some may have a genuine underpinning, real economic activity.”
More than 6 million South Africans are currently invested in cryptocurrencies. The aim of the SARB’s recent decision, is to bring regulatory clarity to crypto firms operating in South African. The SARB hopes that with regulatory clarity, crypto investors can operate in a secure environment.
By classifying cryptos as “financial assets”, the South African Financial Advisory and Intermediary Services Act (FAIS) will apply to the industry. According to FAIS, any person or company that provides advisory services or acts as an intermediary with respect to crypto assets in South Africa, has to be a licensed financial services provider and comply with all the requirements of the Act.
SARB regulatory clarity welcomed
The direction to regulate cryptos as financial assets in South Africa are welcomed. Investors and Traders is hopeful that the decision will protect investors and deter scamsters from operating within the industry.
While a more detailed guidance as to how the regulations will develop over the next 12 – 18 months are awaited, investors remain optimistic that the SARB will not ‘over-regulate’ the space. Furthermore, it will not curb the innovation occurring in this space nor dampen South Africa’s prospects of meaningfully participating in this nascent industry on the global stage and benefiting from the inherent wealth and job creation opportunities.
What does this mean for Traders?
Very little changes for local investors for the time being, particularly those that have been making use of the larger exchanges. Local Exchanges have been dutifully complying with KYC/AML and other requirements since its inception in 2015.
The immediate next steps from the regulator (i.e amending Schedule 1 of the FIC Act) is unlikely to have a large impact on the market at all. The following steps will be to introduce a licensing regime for Crypto Asset Trading Platforms. It will be the duty of the exchanges to ensure they complying with the licensing regime in order to continue operating in South Africa.
Things could be a little more interesting when it comes to the specifics around exchange control, repatriation of crypto assets and the implementation of what’s known as the “Travel Rule”.
The devil is in the detail so to speak and until we get clarity on this detail it is nonsensical to speculate.
It is important to stick to reputable crypto exchanges that comply with rules and regulations. That way, you can rest assured that your valuable crypto assets are in good hands.